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Baek v. Continental Casualty Co.

California Court of Appeals, Second District, Fourth Division

October 6, 2014

LUIZ BAEK, Plaintiff and Appellant,
v.
CONTINENTAL CASUALTY COMPANY, Defendant and Respondent.

[DEPUBLISHED BY ORDER]

APPEAL from a judgment and order of the Superior Court of Los Angeles County No. BC494301, Joseph R. Kalin and Josh M. Fredricks, Judges.

Page 357

[Copyrighted Material Omitted]

Page 358

COUNSEL

Mastroianni Law Firm and A. Douglas Mastroianni for Plaintiff and Appellant.

Page 359

Berkes Crane Robinson & Seal, Steven M. Crane, Barbara S. Hodous and Steven M. Haskell for Defendant and Respondent.

OPINION

EDMON, J. [*]

Plaintiff and appellant Luiz Baek, a massage therapist employed by Heaven Massage and Wellness Center (HMWC), was accused in an underlying action of sexually assaulting a client during a massage. In the present action, Baek alleges that defendant and respondent Continental Casualty Company (Continental), HMWC’s comprehensive general liability (CGL) insurer, had a duty to defend and indemnify him in that action, and that its failure to do so constituted breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. The trial court sustained Continental’s demurrer to all causes of action, concluding as a matter of law that Baek was not entitled to a defense under the Continental policy.

We affirm. To demonstrate that he was insured under the policy, Baek had to allege that the acts on which liability was based were “with respect to the conduct of [HMWC’s] business, ” “within the scope of... employment, ” or committed “while performing duties related to the conduct of [HMWC’s] business.” Because the intentional sexual assault alleged in the underlying case cannot properly be characterized as within the scope of Baek’s employment or having occurred while performing duties related to the conduct of HMWC’s business, Baek was not insured under the policy, and Continental had no duty of defense or indemnity. The trial court thus did not err in sustaining the demurrer without leave to amend.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Jaime W. Action

In May 2010, Jaime W. sued HMWC and Baek for sexual assault. (Jaime W. v. Heaven Massage and Wellness Center (Super. Ct. L.A. County, 2014, No. BC437342 [the Jaime W. action].) The operative complaint alleged that during a massage on January 3, 2010, Baek “touched, fondled, rubbed, grabbed and squeezed Plaintiff’s breasts, buttocks, inner thighs and genitals, all while making and emitting moans, groans, grunts and other sounds and noises of sexual pleasure.” The complaint alleged seven causes of action against HMWC and Baek: sexual harassment, sexual battery, assault, battery, false imprisonment, intentional infliction of emotional distress, and negligence.

Page 360

HMWC tendered Jaime W.’s claim to Continental, which had issued HMWC a CGL policy for the period November 10, 2009, to November 10, 2010 (the Continental policy). Continental denied HMWC’s claim, asserting there was no coverage because the policy’s “professional services” exclusion applied and excluded losses from “‘[b]odily injury, ’ ‘property damage, ’ [or] ‘personal and advertising injury’ caused by the rendering or failure to render any professional service.” HMWC then cross-complained against Continental for breach of insurance contract and breach of the implied covenant of good faith and fair dealing.

The trial court granted summary judgment for Continental on the cross-complaint, concluding there was no coverage under the Continental policy and no duty to defend. HMWC appealed, and we reversed, concluding as a matter of law that Jaime W.’s claim did not fall within the professional services exclusion because a sexual assault that occurs during the rendering of a professional service is not injury “‘caused by the rendering [of a] professional service’” within the meaning of the policy. (Heaven Massage and Wellness Center v. Continental Casualty Company (June 21, 2012, B237987) [nonpub. opn.].)

II. The Present Complaint and Demurrer

Baek filed the present action against Continental on October 22, 2012. The trial court sustained a demurrer to the first amended complaint with leave to amend, and Baek filed the operative second amended complaint (complaint) on May 24, 2013. The complaint alleges that Continental owed Baek a duty of defense and indemnity in the Jaime W. action because Baek was alleged to be either a partner or employee of HMWC and, as such, was an additional insured under the Continental policy. The complaint asserts that Continental’s failure to defend and indemnify Baek gave rise to three causes of action: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, and (3) fraud.

Continental demurred. It asserted that as a partner or employee, Baek was covered by the Continental policy only “for ‘acts within the scope of [his] employment [by HMWC]’ or ‘while performing duties related to the conduct of [HMWC’s business]’ (but not if the bodily injury arose ‘out of his... providing or failing to provide professional health care services’).” Continental asserted that this court’s prior opinion compelled the conclusion that Baek’s alleged sexual assault was not within the scope of his employment: “Because Baek’s alleged acts were not part of the professional services he was hired to perform, they are necessarily outside the scope of his employment. And, because the acts charged against him were outside the scope of his employment, he does not qualify as an insured under his employer’s liability policy.”

Page 361

Baek opposed the demurrer. He noted that Jaime W. had alleged he was a partner or employee of HMWC, an allegation Continental was required to accept as true. Thus, Baek said, he was an “insured” under the Continental policy because all the tortious acts Jaime W. alleged arose out of HMWC’s business or were committed while performing duties related to the conduct of HMWC’s business—i.e., during the performance of a massage.

On August 1, 2013, the court sustained the demurrer without leave to amend. Its written order said: “Baek’s sexual battery was not committed within the course and scope of his employment as a masseu[r], was not apparently done for the purpose of carrying on HMWC’s business as a provider of massage services, and was not ca[us]ally connected to HMWC’s business as a provider of massage services[.] Baek was not covered or potentially covered under the HMWC policy. As a result, Continental did not breach the insurance contract, or the covenant of good faith and fair dealing, by refusing to defend Baek or by refusing to reimburse Baek for his defense costs. If there was no potential coverage for Baek, Continental cannot have breached its duty ‘reasonably to inform an insured of the insured’s rights and obligations under the insurance policy.’ Plaintiff fails to suggest how it is possible to cure, and indeed, has failed to cure despite opportunity.”

Judgment was entered August 15, and notice of entry of judgment was served August 20, 2013. Baek timely appealed.

STANDARD OF REVIEW

“‘In determining whether [a] plaintiff[] [has] properly stated a claim for relief, our standard of review is clear: “‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]. . ." ' [Citation.] Our review is de novo. (Ibid.) The purpose of a demurrer is to test the sufficiency of the pleadings to state a cause of action as a matter of law. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153 [121 Cal.Rptr.3d 819].) We are not concerned with plaintiff’s ability to prove the allegations or ...


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